Which of the following statements is most CORRECT?
A) If a company that produces military equipment merges with a company that manages a chain of motels,this is an example of a horizontal merger.
B) A defensive merger is one where the firm's managers decide to merge with another firm to avoid or lessen the possibility of being acquired through a hostile takeover.
C) Acquiring firms send a signal that their stock is undervalued if they choose to use stock to pay for the acquisition.
D) In a liquidation,the firm's existing stockholders are given new stock representing separate ownership rights in the division that was divested.The division establishes its own board of directors and officers,and it becomes a separate company.
E) If there are no synergistic benefits to be gained from a merger,the acquiring company will stop its plans for the merger.However,if synergistic gains are large,plans for the merger will continue.In fact,the greater the synergistic gains,the smaller the gap between the target's current price and the maximum the acquiring company could pay because of the acquiring company's upper hand in the merger.

Question

Quizplus · Accepted Answer

A defensive merger is a merger that occurs when a company merges with another company in order to prevent a hostile takeover. It is a way for a company to protect itself from being acquired by another company. Defensive mergers are often seen in industries where consolidation is common, and where there are a limited number of players. In such industries, strategic alliances and mergers can help companies to gain an advantage over their competitors, and to protect themselves from being acquired by others.

Which of the Following Statements Is Most CORRECT